Declaring bankruptcy can be a strategic tool for people who have accumulated more in debt than they can reasonably pay off over the course of a lifetime. Despite the many advantages of filing, though, there is one major drawback: the negative impact it can have on the debtor’s credit history. However, that does not necessarily mean you will never be able to finance major purchases like a car or home again. In fact, many people who file end up doing so sooner than anticipated.

Chapter 7 Bankruptcy

A Chapter 7 filing can remain on a credit report for up to 10 years. However, that doesn’t necessarily mean it will take a decade to restore the accompanying credit score. You can expect your score to drop immediately after filing, but as long as you make smart financial decisions moving forward, the bankruptcy will affect the score less and less with every passing year.

In fact, most people who file for Chapter 7 can secure financing within a few years of discharging their debt, and their scores recover much faster after filing than it would have if they had merely continued missing payments every month.

Chapter 13 Bankruptcy

Because Chapter 13 is a kind of reorganization of debt, it affects credit differently than Chapter 7 does. The actual filing will remain on two credit reports for up to seven years and one credit report for up to ten years.

Since the payment plan typically ranges from three to five years, the discharged debts could stay on a credit report longer than the actual filing. Regardless, you can start improving your credit immediately after filing, and both the bankruptcy and debts will impact the score less as time goes on.  

If you have more debt than is manageable, and you think bankruptcy may be the answer, turn to Frances H. Hollinger Attorney at Law in Mobile, AL. These debt relief lawyers are proud to help clients regain financial security and finally lead the lives they want. Visit their website to learn more about what they do, and give them a call at (251) 943-9030 to schedule a consultation today.